Blair faces double defeat by unions

Tony Blair was under growing pressure from Labour modernisers to loosen the party's links with the trade unions last night as he headed for a double conference defeat over health and pensions.

In a fresh embarrassment for the leadership, the unions ganged together to vote for a motion in favour of compulsory contributions to workplace pensions and raising them in line with earnings, and against raising the public sector pension age to 65.

The main elements of the motion tabled by the GMB union ran contrary to government policy.

The leadership appeared to have suffered a separate, heavy defeat on a motion on health policy from Unison, the public sector union, that called for a halt to any further expansion of the role of the private sector in the provision of NHS services. The result will be announced today.

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As union leaders celebrated giving Mr Blair his third thumping of the week - on Monday they won a vote calling for a return to legal secondary action - Blairites said it was time to end the union block vote and weaken the role of the "barons" who wield them.

One source close to Mr Blair said the prospect of three of the main unions - the TGWU, Amicus and the GMB - forming one "super union" with well over two million members raised the "nightmare" prospect of even more concentration of voting power at party conferences. "But it is actually a good thing," he added. "It means we have a very good reason to end the link once and for all."

At a fringe meeting on Tuesday, Stephen Byers, the former transport secretary, added his voice to those calling for a weakening of the union link.

Another ally of the Prime Minister even suggested that Mr Blair was warming to the idea of state funding of political parties.

This would mean an end to the system whereby Labour relies on money raised through union affiliation fees. Instead taxpayers would fund the political parties as they do in other European countries such as Germany.

Pressure for a rethink has mounted as the anti-Blairite faction has gained sway over the party machine, weakening the Prime Minister's control and his ability to stage-manage conferences.

Earlier this week, the ruling National Executive Committee, which contains a majority of moderates, also refused to back the leadership over workers' rights, health policy and pensions.

Yesterday's vote on pension policy came despite an appeal from David Blunkett, the Pensions Secretary, for delegates not to tie the Government's hands on such a vital issue.

But Tom Brennen, of the GMB, said a Labour Government had a duty to ensure pensions rose in line with earnings rather than with inflation, which tends to increase at a slower rate.

"We should grasp the nettle. Far too many have waited far too long for this Government, a Labour Government, to introduce a fair, universal state pension scheme and one that increases with average earnings."

On health, Dave Prentis, the general secretary of Unison, said New Labour was transforming the NHS into an organisation driven by money rather than the needs of patients.

Patricia Hewitt, the Health Secretary, denied that the Government was privatising the NHS and made clear that she would not change her policy because of a defeat at the hands of the unions.

Far from selling off the NHS, ministers were merely buying in extra services from private providers to expand NHS capacity and bring down waiting lists, she said.

"We are not selling hospitals or any facilities to the private sector." The policy was already reaping rewards, she said, citing a drop in waiting times for cataract operations from three years to three months.

She added: "Haven't we learned in government that profits aren't a dirty word? They are part of a healthy, dynamic economy urging new improvements, new innovations, better and more efficient ways of doing things.

"The only way that we will meet the promise we made to cut the waiting times to just 18 weeks from GP referral to the door of the operating theatre is by making a massive investment in the diagnostic capacity of the NHS and by mobilising the capacity and resources of the independent and private sector as well."